Common Pakistani gives a damn to ponder upon stock's analysis and decide to invest in property market by comparison.
Simply there is no option to invest in other venues. Mafia is sitting everywhere to discourage investors.
Our real estate is mostly expat driven plus time to time internal big boys ganged up and do huge buying to escalate prices and take back their money by selling at high time.
Now of course amnesty is working to jack up the prices.
Stock markets run totally on speculations & gambling the world over.
At this very unpredictable and unprecedented situation, buying in ultra high prices societies is not advisable..
As per my 2 cents, bahria phase-8 orchard, developed & non developed blocks, extension, dha-3 army allocation, I-series CDA sectors, DHA valley ballotted & possession blocks, good developing societies in Wah cant. "Raqba Jat" around Fate Jang, land around CEPEC junctions & buying around the most recent route, being worked out now, of RRR is advisable..
RRR will have reportedly both side service roads which will benift the whole area around.
The point: PAK real estate, in it's current form, remains unregulated and acts as 99.9% of how stock act/react.
In stocks for example just a speculation about increased remittance can drive the market upwards and rumors about about sanctions can drive it down. Similarly, only a rumor about new bookings/launches or speculation about litigation can make a existing inventory to go up or down.
Stock Market can crash in a single evening and in mnay projects the own/demands started crashing the day news about RRR scam broke.
Name it Real Estate or whatever it's an unofficial stock market. Pakistani nation obsessed with having more and more land (social boosting factor too) and getting into less technicalities sees real estate as most suitable options than stocks.
Interesting Point: Physical Property (Balloted Plot/Possesion Land) can be divided into shares. For example a 25x50 or whatever dimension plot (CDA/DHA/RDA/LDA etc.) divided into 1250 or whatever shares and owners can own a plot on sharing bases and able to buy or sell one or many shares of their shared plot in the market. It for sure need technicalities to be sorted but not much of a rocket science and only needs regulation like stock market (PSX, ISX, etc.), it can make PAK real estate much more lucrative and innovative for invetstors. Much better solution than file business. For example Investor can buy X shares in a CDA plot/project and Y shares let's say in DHA and able to switch them whatever they see profitable.
@Imtiaz Real estate is nothing like stock market. Yes speculation exists in both real estate and stock market but speculation is far greater and more impactful in stock market than real estate. Price volatility is very high in real estate, major price changes can take place within a matter of seconds or minutes but in real estate, prices slowly rise and fall. RRR scam is a bombshell news so cannot be used to say 'oh real estate is volatile'.
@Abdul Qayyum Doesn't matter if you are buying in high-price or medium-price society, buy whatever you can because over the next 6-12 months, considerable gains are incoming. Best to buy in areas where rapid construction is taking place right now.
Asad:
Yes, however the key and most importantly the (overlooked) term PAK real estate not the real estate in a global context. As stated, not exactly same for sure but can get as close as it could be ...
The actual argumentation was about Boom which for me, is more like a Bullish run after years of stagnation.
@Imtiaz Pakistan real estate behaves very similarly to global market and most of my points still stand. Real estate everywhere behaves in a similar manner and every country's real estate has a bull and bear run, this is nothing new. The only different for Pak real estate is that the boom and bust cycle seems to occur every 4-6 years whereas in other countries, that cycle is maybe a bit longer.
Also note, deadline to sell prize bonds of Rs40,000, Rs25,000 and Rs15,000 denominations is till 31st september. So lots of people with black money are beginning to park their cash in real estate with the news of amnesty extension. Price jump is definitely coming from this month till september everywhere. This is the time to buy, buy whatever you can right now.
Globally, let's say EU, my personal experience, I am yet to see:
- Any dealers creating hypes to sky rocket prices
- File stuff that never fulfils till generations passed
- Projects like BT whose Real Estate Asset = 0 in terms of Bank Guarantee
In Germany and alike countries teen and younger age people despite having stable income prefers to live on rentals rather than buying at own.
Mortgagiging is extreme common and here it's a hell to even go through the process. In most of western parts of the world buying selling of residential is primarily of built units rather than mostly the plots.
Here apartments except KHI is considered as least liquid while in most of matured Real Estate abroad Apartments are as good and at times better than houses.
These are just a few pointers, to support my argument. Your stance for sure reads solid and we'll apprecited as a counter argue. For me, PAK real estate, it's internal mechanics are far from aligned to global real estate and it's more like trading.
@Imtiaz Those are economic reasons. In foreign countries, they have a very large middle class due to their developed economics but in Pakistan the middle class is very slim which is why barely anyone takes mortgages because they cannot afford to repay it back. The people who do take loans for construction do so for finishing stages as they have cash flow problem.
Pak real estate is more alike the global market than you think. Yes circumstances of economy, buying power, buying/selling mechanisms is different but the way in which they operate is relatively similar.
Greed is same everywhere. Markets all over the world mostly work similarly.
As far as financing Auto Loan (financing the asset) PAK banks are at forefront. They use it as a tool to rip-off and can easily finance anyone having finances reserved (monthly Salary/3) to get any Automobile instantly. Note: Auto is a movable and highly depreciable asset. I know a few people who earn let's say in 150 range to have a Corolla GLi financed for 5 - 7 years and bound to pay 33% of their monthly to the bank. Why wouldn't they pay to bank, instead of monthly rents to tenant to get the house at their name in let's say 15 - 20 yes frame.
It's more to do with banking model of financing rather than just the economy.
In contrast, House Financing is seen by banks as less lucrative and not preferred as much as Auto Finance. Less money making (no need for tracker, theft (higher probablity than a house) and faster depreciation etc.). We see generations after generations pay rent. I am sure 99% or more would be willing to pay same to bank and own the asset (house) within single generation time...
I shared a few examples, some as personal experience (in 2nd last post), other pretty much known facts to have my premise that off-course remains prone to factual corrections ...
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Yes, Shahzad brother the ideal guidelines remains same globally but practices vary and day light example is pathetic Hondas and Corollas that are far cheaper and superior when in Global Market and in PAK
- Sold at high premiums (own)
- Sometimes a second hand is more expensive than brand new
- Bookings of New Generation without reveling any specs
- Global Market enjoys let's say X Generation and PAK still using X-2 generation for almost a decade.
-Taxes on vehicles upto 40%
- Almost no safety features
This is just one example to highlight why many segments of PAK market are so diffent to global happenings.
Regarding Real Estate: File Business, Comission/Own on Booking Forms only, Change Layout of State Projects to benefit certain housing projects to sky rocket prices and than crash them. In any half decent state (Global Perspective) none of it happens or does that...?
Interesting Point: Physical Property (Balloted Plot/Possesion Land) can be divided into shares. For example a 25x50 or whatever dimension plot (CDA/DHA/RDA/LDA etc.) divided into 1250 or whatever shares and owners can own a plot on sharing bases and able to buy or sell one or many shares of their shared plot in the market. It for sure need technicalities to be sorted but not much of a rocket science and only needs regulation like stock market (PSX, ISX, etc.), it can make PAK real estate much more lucrative and innovative for invetstors. Much better solution than file business. For example Investor can buy X shares in a CDA plot/project and Y shares let's say in DHA and able to switch them whatever they see profitable.
@Imtiaz
interesting,that will attract a lot of money in real estate but ultimately it will make property more expensive and way out of reach of common people to buy a single plot, wont it?
Raja sb,
-- With Amnesty into Shared Based Real Estate it will make it more attractive as whitewashing inflow undeclared money is not that easy to pump into stocks. Plot selling takes more time, more commission, more efforts while shares are easy to trade compared to an entire plot.
-- Anyone can own a single share or multiple based on their purchasing power. The important factor is that on a possession plot it will not vanish like companies may go defaulter, stocks crash and money disappeared. In a Plot, its a physical asset pledged against a number of shares and cant vanish unless some natural catastrophic.
-- Consider the scenario, I own 20% shares in a CDA plot/asset and I can sell in other project to gradually increase my share from 20% to 50% or whatever. Thats also like an incremental ownership of full asset (installments) but better taxation, physical plot.
-- It might make it expensive but regulated, properly taxed, more transactions, more economic friendly.
True that its not as easier done, as said but that's for sure needs regulations and I am sure some sharp brains can work out the modalities of this model.
well, for now at the very least we can say a theoretical stuff to which other valued members can add to the discussion or refine the model.
@Imtiaz and @Raja Zaid sahib,
The model described by Imtiaz sahib is quite similar to how crypto currencies and especially the bitcoin is bought/sold these days considering the fact that a full bitcoin is around $37K (price changing by the second...) one can go and buy a perctenage of that for say $500 usd and then increase this or liquidate his position as and when required. Now If somebody in Pakistan were to setup a similar property exchange and sell the public property assets backed up by the government this could also be a good revenue earner for the government. There are already companies in Europe who do do this for both commercial and residential property projects and all the user needs is to create an account with a credit/debit card.
@Raja @Imtiaz
What you guys are talking about is known as ‘fractional ownership’. The idea is to have more than one ownership in a piece of real estate which would be impossible for one person to buy outright. A lot of teams are trying to bring it to blockchain.
This idea is little practiced around the world. Mostly, it’s practiced in the rental market where more than one party owns fractional ownership in an apartment or a building and then rent is divided amongst the fractional owners. This idea hasn’t gained much attraction as a better alternative (already regulated) in form of holding company/ REITs already exists.
Well makes sense, time to time we see queires from brothers on this forum that they have about 1 - 2 mil as their hard earned saving and they want to utilize it in RE as secure as possible and getting some steady income out of that.
That fraction (1 - 2 mil or whatever denominator) can get ones a fractional/partial ownership and rental or profit yield. Still much better than scam files in that budget!
Wouldn't recommend partial ownership of real estate or in fact any kind of partnership in real estate or construction. It's the kind of thing that is set for disaster.
If you have limited budget and not enough to buy real estate, you're better off investing it in the stock market or gold (whenever it becomes favourable to buy again after future correction). Pakistani stock market has historically done well and over the last year has shown good returns as well.
That's merely a discussion & proposal rather than a recommendation or lack of it. Having said that, JVs are an integral part of RE and every mega project need diffent set of expertise rather jack of all trades unless one prefers to settle for construct-sell/retain cycle for 5 Marlas or so residential. In JVs, sometimes it's not just about finances it's about an entire delivery chain from idea to execution to delivery and so on needing a team to deliver. Yes, selecting the appropriate people to work with is the most challangeing bit that must not be over looked, agreed, cent-percent. On first attempts one is almost always certain to make a mistake to learn and move on to excel.
On a similar note:
One of the (PAK origin) guy behind Careem propsed the idea to be executed from within PAK, was not entertained took that to UAE, had the right team to sell it to not only PAK but world around. I remeber this very platform (zameen) was outrightly rejected by RE agents in its early days with claims on the line of Plots Net Par Nahi Biktay
Bottom Line: Any ideas denying historical trend will most probabaly get a resistance, if not, the idea most likely is not worth the pursual ...
@imtiaz
Disruption is healthy for progress. But there are times once disruptors have been disrupted.
Careem and Zameen copied the business ideas which were already very successful in developed countries. Fractional ownership is something which hasn’t been successfully executed (at large) in first world countries so not sure how it can be done in pakistan.
Best way to get exposure to real estate is through investment in REITs.
"The only constant in life is change" - Heraclitus
I have seen household names consigned to the dustbin who refused to embrace change regarding new ways of working and doing business. Shared ownership of property is another concept that will no doubt gain traction in Pakistan in the near future.
I don't believe shared ownership will become that popular for the simple reason that gold and stock market exist - something that is far more liquid and you fully own yourself. If budget doesn't allow, people always invest in gold and stock market. If their budget does allow, they invest in real estate.
I have seen so many partnerships in construction and real estate break up over the last few years. You should only go for partnerships if you are trying to learn from the other person or get onto your own feet. But for investment purposes, if your budget is low, stick to gold and stock market.
Shared/fractional ownership and joint investments are already happening in limited circle of known and trusted ones. A public offering would entail strict regulatory procedures to prevent investors from fraud or falling into scams. Otherwise, it might open gates for Double-Shah to deprive people of their hard-earned money by giving verbal assurance of high returns.
Then there's whole issue of taxation. How would you calculate and pay off personal tax liabilities if profits or rental shares are not documented to FBR acceptance.